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Panama leaks have taught the Indian rich a lesson

April 07, 2016 12:49 IST

'Given the past record, no one will be prosecuted, especially since the beneficiaries comprise the most powerful people in the country. They will pay a fine and be let off.'

Rashme Sehgal reports.

Wealthy Indians have received a hard knock with the exposure of 4.8 million emails, three million database files and 2.1 million PDFs covering financial transactions spanning a 40-year period of the Panamanian law firm Mossack Fonseca.

They have realised that even the most secretive of transactions can find its way into the public domain.

Mossack Fonseca had claimed providing water-tight security and complete secrecy to its clients. Billionaires who wanted to start offshore companies did not have to appoint any individual as a director or a shareholder.

Mossack Fonseca, as a registered agent, provided the names of their own executives to play the role of  directors and shareholders of these companies, thereby ensuring secrecy for their clients. They also provided names of law firms or even banks to be directors or play the role of a nominee shareholder all done for a sharp fee.

No wonder well-heeled politicians, film stars, businessmen and sports personalities made a beeline for this firm.

A senior Delhi-based tax consultant pointed out, “It is this quality of being able to provide water-tight security and secrecy which saw rich Indians make a beeline for Panama. Earlier, a large number of Indians used to opt for Mauritius which offers a better tax agreement. The Double Tax Avoidance Agreement has helped offset the tax liability of thousands of Indians.”

But the tax consultant also said, “These offshore companies have been created by Indians from all parts of the country. There are well-known celebs such as film-stars Amitabh Bachchan and Aishwarya Rai. But there are also little known business men from cities such as Vadodara, Dehradun and Panchkula.  Some of the investments in shares are rather low. We need access to their financial statements to get an idea about how much was invested and when.”

Both Big B and Aishwarya Rai have denied any connection with these companies, Big B going to the extent of claiming his name could have been “misused”.

'I do not know any of the companies including Sea Bulk Shipping Company Ltd, Lady Shipping Ltd and Tramp Shipping Ltd. I have never been a director of any of the above-stated companies and it is possible that my name was misused,' said Bachchan in a statement.

Other prominent businessmen whose names have featured in this expose are DLF chairman K P Singh and several members of his family, Indiabulls owner Sameer Gehlaut, Onkar Singh Kanwar of Apollo Tyres and Gautam Adani’s elder brother Vinod.

But Singh’s family members insist they have been fully compliant with all Indian laws. Gehlaut has also issued a statement insisting that all overseas investments were made after paying taxes in India and were in line with the existing RBI rules which allow Indians to remit earnings under the liberalised remittance scheme.

In other countries, these leaks have begun to take a toll. Iceland prime minister David Gunnlaugsson put in his papers following large-scale demonstrations in Reykjavik. To take the heat off him, the Pakistani premier Nawaz Sharif has ordered a judicial commission to probe into allegations that his family members were involved in offshore dealings.

A similar charge was made against Chinese leaders including the Chinese President Xi Jinping, whose families have been found to have links with Mossack Fonseca.

Russian president Vladimir Putin is reported to have shuffled over $ 2 billion through banks and shadow companies, according to information collated by the International Consortium of Investigative Journalists who put together this major report called the Panama Papers.

The leak has exposed the hidden financial details of 72 current or former heads of state and over 50 prominent public officials from across the globe.

Finance Minister Arun Jaitley has announced that he would come down heavily on tax evaders and government authorities claim they have detected over Rs 2000 crores to be stacked in foreign accounts.

Indians are not the only once trying to evade paying taxes by investing their monies in tax havens. These papers vindicate that this is the practice adopted by the wealthiest across the globe. In fact, Swiss companies and banks have created the largest number of offshore accounts, according to this disclosure.

Indian tax consultants believe the majority of Indians whose names have cropped up in the Panama Papers are going to get away by paying a fine. Enforcement Directorate officials believe defaulters will be asked to pay a fine that is three times the worth of the violation but it will not be accompanied by any jail sentence.

Lawyer activist Prashant Bhushan admits, “Given the past record, no one will be prosecuted, especially since the beneficiaries comprise the most powerful people in the country. They will pay a fine and be let off.”

Another Delhi-based tax consultant asserted, “Offshore accounts are where the wealthy parked their money before letting it come into India.”

This latest exposure has created shock waves among the wealthy. The numbers of whistleblowers is on the rise. Whether it was the leakage of the Pentagon Papers in 1971, WikiLeaks in 2010 which comprised of 1.73 gigabytes of classified documents, followed by the HSBC leaks on money laundering in Swiss banks and now the Panama Papers.

The latest tranche contains 2.6 terabytes and is a thousand times bigger than WikiLeaks.

These exposes have disconcerted the rich who are left wondering what they should do next in regard to this vexed issue.

Rashme Sehgal in New Delhi
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